It is difficult to book an airline ticket or a hotel room, buy online or rent a vehicle without a credit card. But what happens if your credit is bad or if you simply don't want a credit card? The answer might be a prepaid credit card. With a prepaid credit card, you deposit money with the card issuer and have a credit limit of that amount. When it comes to paying bills, however, there can be certain problems. For example, most companies not will accept prepaid credit cards for a recurring monthly payment plan. Other than that, prepaid cards can be used to pay virtually any one-time charge, including most bills.
Check with your creditors to determine whether they will accept a prepaid credit card for a recurring monthly payment. Some creditors, such as utility companies, refuse prepaid credit cards for recurring monthly bills because that money may not always be deposited into the account, although virtually all creditors will accept a prepaid card for a one-time payment.
Present your prepaid credit card to your creditors the same way you would present a standard credit card for one-time purchases. In most cases a creditor or a merchant will not be aware--or will not care--that your prepaid credit card is not a more traditional credit card, so long as your account has enough money to cover your transaction.
Buy certain items, such as gasoline and hotel rooms, with caution when using a prepaid credit card. Some merchants require that additional money be held on the card in case additional fees need to be charged to your card later. These additional "ghost" fees may not be removed from your card for several days after you buy gasoline or rent a hotel room, causing you to have less money available than you may be counting on. In some cases these excess fees may cause your card to be declined, even though you technically have enough money on the card to cover your purchase.
Keep track of fees associated with your prepaid card. The original purchase fee for the card, monthly fees, per-use charges, reloading fees and other charges are often included in the "fine print" when you buy your card. Be aware of these fees and compare fee schedules among various prepaid credit cards.
Be aware that virtually all prepaid cards have a limited life. Prepaid cards expire after 12 to 24 months, regardless of any cash that may be left on the card.
- credit card image by jimcox40 from Fotolia.com